In a perilous economic and fiscal environment, with instability created by Trump’s trade war and publicly held debt on track to surpass the highest levels ever recorded within five years, a lot rides on how Republicans navigate tax and spending reforms in reconciliation.
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As Republicans look for ways to offset the budgetary cost of extending the expiring provisions of the Tax Cuts and Jobs Act (TCJA) and potentially enacting other tax cuts, the latest estimates indicate several trillion dollars could be raised by reducing tax credits and other preferences in the tax code.
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Given the poor state of the budget process and worsening debt trajectory, lawmakers should move boldly and quickly to address the issue, including via a fiscal commission process. Issues to consider should include reforms to both spending and taxes.
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If lawmakers are convinced that new revenues must be part of any long-term effort to solve the budget crisis or offset the cost of extending the TCJA, they must choose the least harmful ways of raising new revenues or else risk undermining their efforts by slowing economic growth.
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Short FormWith pandemic-era savings now fully depleted and the majority of Americans pointing to their finances as their biggest source of stress, one thing is clear: the US needs policies that help people save more.
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The government provides various services at the federal, state, and local levels. How are they paid for? Taxes.
President Biden is proposing extraordinarily large tax hikes on businesses and the top 1 percent of earners that would put the US in a distinctly uncompetitive international position and threaten the health of the US economy.
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For over a century, lawmakers have exempted politically favored organizations and industries from the tax code. As a result, the tax-exempt nonprofit economy now comprises 15 percent of GDP, roughly equal to the fifth-largest economy in the world.
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Universal savings accounts would boost savings for low-income households, allowing them to better withstand economic shocks, such as pandemics and recessions, and plan for major expenses, such as an expanded family, education, and housing needs.
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Given that U.S. debt is roughly the size of our annual economic output, policymakers will face many tough fiscal choices in the coming years. The good news is there are policies that both support a larger economy and avoid adding to the debt.
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For most Americans, saving is a taxing experience. Our neighbors to the north have found a better solution—and U.S. lawmakers should take note.
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Can an organization rightfully be called a “nonprofit” if it almost always makes money? And what if most of that organization’s income comes from “business income,” should it legitimately be considered a “charity”?
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Now is the time for lawmakers to focus on long-term fiscal sustainability, as further delay will only make an eventual fiscal reckoning that much harder and more painful. Congressional leaders should follow through on convening a fiscal commission to deal with the long-term budgetary challenges facing the country.
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Lawmakers should avoid delivering social and economic benefits through the tax code whenever possible and work to simplify or repeal the tax expenditures already in the tax code.
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Rather than continue down the path of growing debt, lawmakers should craft a comprehensive solution. International experience cautions against tax-based fiscal consolidations, but modest tax increases may be part of a successful debt reduction package.
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As predicted, the Inflation Reduction Act’s misguided price-setting policy is already discouraging drug development. Rather than double down on it, as President Biden proposes doing in his budget, lawmakers ought to restore incentives to invest in the United States.
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Scandinavian countries are well known for their broad social safety net and their public funding of services such as universal health care, higher education, parental leave, and child and elderly care. So how do Scandinavian countries raise their tax revenues?
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Immediately balancing the $20 trillion budget shortfall would take drastic, unwanted policy changes. Instead, lawmakers should target a more achievable goal, such as stabilizing debt and deficits with an eye toward comprehensive tax reform that can produce sufficient revenue with minimal economic harm.
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The latest CBO long-term budget outlook paints a troubling picture of fiscal irresponsibility. Rather than halt this rampant spending, Congress is actively adding programs that will exacerbate these long-term trends.
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